LAWRIE WILLIAMS: World top 20 gold mining companies and mines 2018 - Metals Focus

In the second of our articles based on data from consultancy Metals Focus’ Gold Focus 2019 report, we rank the world’s 20 largest gold mining companies and mines according to the compiled data.  Metals Focus is one of the top independent precious metals consultancies and also compiles data for the World Gold Council’s annual and quarterly gold supply/demand analyses.

There was a significant change at the top of this table last year as Newmont overtook Barrick as the World No.1 gold miner, although both produced less gold than in 2017 due to divestments of properties considered non-core and rationalisations. Of course since the year end there have been further changes with Barrick merging with Randgold Resources as from January, which will propel it back into the No. 1 spot.  However, Newmont is also in the process of an agreed merger with Goldcorp, due for completion by the end of the year which, assuming it goes through without a hitch, will leapfrog the combination well ahead of Barrick again, despite the big decline in Goldcorp’s gold output in 2018.  The two companies are also planning some rationalisation of their big Nevada gold mining operations in 2019, although this is likely to benefit costs more than production.

Table1: Top 20 Gold Mining Companies 2017/2018 (Tonnes)

Source: Metals Focus, lawrieongold

Apart for the Barrick and Newmont transpositions the biggest notable change in corporate gold output, and in newly mined gold production, was at Freeport McMoran’s Grasberg operation in Indonesia where the final stage of mining of the open pit has been in significantly higher grade materials.  (as well as being the world’s largest gold producer last year, Grasberg was also one of the world’s largest copper mines and the gold is technically a byproduct).

Harmony also saw a big production increase, although this will have primarily been driven by its Hidden Valley operation in Papua New Guinea in conjunction with Australia’s Newcrest which moved above Goldcorp in the 2018 gold production table and its acquisition and integration of Moab Khotsong from AngloGold in South Africa..

Other notable moves in the tables are the two biggest Russian headquartered gold mining companies, Polyus and Polymetal both up 13%, although the latter’s increase will mostly have come from its big new Kyzyl mine in Kazakhstan.  One of the biggest drops was by Sibanye Stillwater which is having continuing problems as its South African gold mines get deeper and less profitable.  It is running down its Driefontein operation over the next few years - The western part of this property used to be the world’s richest gold mine.  This may well be while Sibanye Stillwater is nowadays putting much of its management effort into platinum and palladium.

Table 2.  World’s largest gold mines in 2017/2018 (Tonnes)

 Source: Metals Focus, lawrieongold

At current gold prices, Metals Focus notes, 90% of existing gold mines are profitable on an All in Sustaining Costs (AISC) basis despite almost across-the-board rises.  Cost performance has been helped by most currencies in gold producing nations falling against the U.S. dollar in which gold is priced, although this advantage tends to be quickly eroded by inflation.  Average AISC came in at $909, up 3% year on year.  Metals Focus expects the dollar to remain strong in 2019, which reduces the pressure on marginal mines except in dollar area countries like the USA, and China where the yuan is pretty closely tied to the dollar.  Of the various regions, Russia and the CIS countries have the lowest AISC costs, while Africa comes in at just over $1,000 an ounce - still a reasonable margin against a $1,300 gold price.

Despite the likelihood of costs falling further at new operations which are in the process of ramping up to full production, Metals Focus still anticipates costs increasing overall in 2019, but the consultancy is also anticipating that the gold price will be a little stronger this year too and perhaps will grow faster than costs.

Capital Expenditures also rose last year, but are still well below the 2011/2012/2013 highs with financial sources reluctant to lend on new mega projects, while sustaining capex has been falling as mining companies have been forced into making savings in this area.   This trend will likely continue, although not indefinitely.

Taking all the above into consideration the global gold mining sector is perhaps in better shape than equity prices would suggest.  In our view it is poised to do reasonably well in 2019 if gold price forecasts hold up.  We may still not have seen ‘peak gold’ yet but we have to be getting close, with Metals Focus predicting a small (below 1%) increase in global gold output this year.

02 Apr 2019 | Categories: Gold, Mining

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